Spain's government has agreed in principle on a rent cap. Mallorca and the neighboring islands are particularly affected by the issue.
On Mallorca, the issue is a particularly hot potato: The Spanish coalition government agreed on a rent cap in mid-April. However, the autonomous regions are to decide on the implementation, which in the Balearic Islands also depends on the elections on May 28th."We will be the first region to introduce this," said Social Democrat Minister President Francina Armengol in the event of a victory, after eight years during which little or nothing was done to calm the overheated rental market. However, the conservative People's Party, which is leading in the polls, has spoken out against the legislative package. Instead of bans and regulation, it would prefer to focus on incentives and more housing construction.It is clear that the new housing law (Ley de Vivienda) can only have an impact in the new legislative period. First of all, it still has to be passed in Madrid, while the Balearic Parliament has already been dissolved before the new elections in May and can no longer make any decisions.
New „Ley de Vivienda“
In any case, the application is subject to conditions that apply to 95 percent of the territory of Mallorca and the neighboring islands: Either rental prices must be at least 30 percent of the average income or there must have been an increase in the region in the last five years that was more than three percentage points above inflation overall.
In this case, large landlords (five or more apartments) are bound by a rent index yet to be drawn up and small landlords by the price from the last contract with a previous tenant, if such a contract exists and is known. The upper limit for rent increases imposed since coronavirus is to be raised from two to three percent from 2024, meaning it is nowhere near enough to cover inflation.
Property tax penalty in Mallorca?Vacancies for over two years are to be penalized with a property tax increase of up to 150 percent of the normal amount, but only for owners of at least four apartments in a municipality and at the discretion of the council.
Deposits will be reduced to one month's rent. Estate agent fees would in future have to be borne solely by the landlord, and indirect price increases via ancillary costs would also be restricted. Observers now fear that some of the apartments could be sold or disappear from the market due to the new requirements. There could also be an increase in under-the-table transactions, for example with relatives. Such tendencies had already become apparent in Catalonia, when a rent cap was temporarily in force there that was later banned by the Constitutional Court.
The further complication of forced evictions, such as in the case of rental vacancies, is now particularly controversial. According to the newspapers in Mallorca, a new procedure in the Housing Act will generally delay these by two years.And rental contracts, which have generally run for five years in Spain since the reform in 2018, will now all have a statutory extension option for a further three years at existing conditions.
What sounds tenant-friendly at first glance and could perhaps make conditions in Spain more similar to those in Central Europe also harbors a risk, as landlords could feel deterred or demand extreme bureaucratic evidence in the future, especially in Mallorca.
Michael U. Maier
